I guessed Emblem would drop at around $200m and wasn’t far off, but what’s been most impressive about the next big marijuana deal’s drop into the Venture Exchange wasn’t where it landed, but how well it held up.
The stock jumped into trading at $2.85, a significant jump from it’s last financing round of $1.25, then raced to the heady heights of $3.98 for a hot minute before finding its level at $3.30, a valuation of $216 million, and up 186% from where the pre-listing price had been set.
Helping with the strength of the ticker: The small number of actual free trading shares available, with most locked into a four-month hold and/or escrow. With trading volume of 6.2 million on the day, that’s basically the whole float changing hands at least once.
A lot of big name IPOs/RTOs hit their listings with enthusiastic investors coming in with an ambitious opening valuation, and trail off through the day, leading other investors to view what is a successful debut as somewhat disappointing. CannaRoyalty’s Thursday ta-da suffered a little from that thinking, even though the valuation was significantly more than $100 million, and though the stock has kicked on in the days since, Emblem’s opening shots have been more thunderous than most.
Tomorrow comes the test, when the ticker symbol starts getting around to all the places people look for ticker symbols, and the temptation of other companies will test how long investors want to ride the Emblem wave.
I suspect it will hold up well, because I believe it to be undervalued where it is right now. If all Emblem had going for it was its marijuana grow and sale license and its potential as an agri play, the $200m+ value would be pretty close to the money. But with its Emblem Pharmaceuticals division, run by former Oxycontin/Purdue Pharma boss John Stewart, you have to factor in the potential for that company to make significant deals by itself.
If GW Pharma (GWPH) is valued at a few billion on the back of one product moving through the FDA maze, you have to assume Emblem gains a valuation of maybe $50m-$100m on the strength of what it can do in the same vein, with the guy it has up top and his $30 billion track record.
What a time to be alive. Marijuana in Canada is a billionaire business at last.
— Chris Parry
FULL DISCLOSURE: Emblem Cannabis (EMC.V) is an Equity.Guru marketing client